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The Problem with Changing Plans (EB-5)

March 9, 2015

Maze Starting a business can be difficult. Sometimes an initial investment and a dream aren’t enough to create permanent jobs (or even profits for the entrepreneur); success is often the result of trial and error. However, in the case of EB-5 investing, the potential for changes in business plan add an extra dimension of difficulty. The issue originates in filing procedure. A business plan must be submitted as part of the petition to start the process, before the immigrant begins conditional residence. USCIS will then expect that the business plan included in the original petition is followed in order to fulfill the job creation requirement to receive unconditional permanent residence.

The expected timeline for an EB-5 investor (that doesn’t use a regional center) appears straightforward. A business plan must be drafted and $1,000,000 (or $500,000 for Target Employment Areas) must be secured. The investor then files the I-526 petition with this information, its approval implying that USCIS thinks the plan is feasible. Once this happens, the immigrant undergoes the normal process for obtaining a green card, though the one received at this stage is only good for two years. During those years, he or she must follow the approved business plan and create at least ten full time W-2 positions. If this has happened by the end of two years, the immigrant investor will receive approval on the I-829 petition to remove conditions on residence.

While many investors have been able to do this, in part thanks to competent legal counsel, the expectation seems somewhat unrealistic. It rests on the apparent assertion that it is possible to successfully predict two years’ worth of economic activity (with no chance to course-correct as needed). USCIS holds that in order for the investor to stay eligible for successful immigration, there cannot be any “material changes” made to the approved business plan. (The term “material changes” lacks specific definition; unfortunately giving USCIS the ability to decide what it means on a case-by-case basis.) This makes things much harder for immigrant investors. Of course, one will be in good shape if the business plan can be followed lucratively enough to sustain 10 permanent jobs. Short of abandoning the project, however, this leaves someone whose EB-5 business is in need of improvements to the original plan with two options: either report the deviations in the petition to remove conditions–or don’t. USCIS has implied that both of these increase the chance of denial.

The world is rapidly changing, and in order to stay successful, businesses must claim every competitive advantage within reach. The above practice goes completely against this. The difficulty is easy to see, so the government responded by saying that immigrant investors who need to update their business plan may submit a new I-526 petition. However, this does not represent the giving of any ground on the issue. If the agency felt that its policy of expecting that there be no “materially changes” in a business plan for two years might be problematic, one would expect it to define what material changes are in a manner consistent with today’s business demands.

USCIS could have taken this opportunity to give the term a definition that prohibits only the biggest changes like moving to a different region or economic sector. Instead, we are left with one that makes all changes “material.” This means that something as simple as expanding a gas station to include auto repairs (in order to bolster job creation and customer base) would require a new petition. This may seem like a good idea until the consequences of doing so are considered.

  1. Permanent residence would be delayed by at least two years;
  2. Conditional resident derivative children who are now over 21 would not be eligible to obtain another period of conditional residence;
  3. The five year period of continuous residence required for citizenship would not include the time elapsed under the previous period of conditional residence; and
  4. There is no legal guarantee that the new I-526 will render the immigrant eligible for a new period of conditional residence (giving the immigrant no way to challenge a decision to deny).

It should be abundantly clear that this does not solve the underlying problem. The expectation for an immigrant investor to not adapt or improve his or her business (without starting a new period of conditional residence) does not advance the interests of the country–and instead creates undue difficulty for those whose presence is good for the economy. Our recommendations for affected EB-5 investors in light of this can be found here.

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